Asian markets boosted by Fed hints, Wall Street gains

Asian stock markets shot higher on Friday on Wall Street's lead after the Federal Reserve hinted at a pause in US interest rate rises, soothing fears over slowing global growth, dealers said.

They said that while the Fed hiked interest rates by an as expected 25 basis points to 5.25 percent Thursday, it also rewrote its policy statement in a way that raised hopes that an end to its monetary tightening was close.

In the run-up to the Fed decision, the markets had been on tenterhooks as investors turned hot and cold amid endless speculation the US central bank, under new chief Ben Bernanke, would take a hard line on inflation and continue to hike rates for much longer than had been expected earlier this year.

That overhang now seems to have been removed.

"The Fed's comments gave a very strong hint that there will be an end soon to the interest rate hike cycle," said Peter Lai, sales director at securities firm DBS Vickers in Hong Kong. "Investors are very positive, believing the Fed will stop the rate hikes soon," he added.

The markets were now taking the view there may be one more rate rise either in August or September to 5.5 percent and then the Fed would be done.

On the day, that was enough to spark sharp gains across the region, with Tokyo up 2.54 percent, alongside Hong Kong and Seoul, while Sydney put on 1.53 percent. Manila was the best performer, up 4.52 percent.

The easing of concerns over interest rates encouraged the region as a whole, with the market staging a relief rally on the Fed lead and the Taiwan central bank's own modest tightening of monetary policy on Thursday, they said.

The weighted index rose 97.02 points to 6,704.41, off a high of 6,731.07 points, on turnover of NT$115.80 billion (US$3.55 billion).

Risers led decliners 616 to 293, with 110 stocks unchanged.

Dealers said the market is likely to maintain its positive tone in the week ahead, marked with increased volatility due to profit-taking expected at around 6,800 points.

Investors were quick to get into the market, building on Thursday's upturn as they welcomed the Fed's more guarded statement on the outlook for inflation, Fubon Securities Investment Services manager Daniel Tseng (曾建詮) said.

Tseng said the market should now be on firmer ground, with the uncertainties over interest rates and domestic political problems resolved for the near-term at least.

However, there will be a strong temptation to take profits if the market moves closer to 6,800 points, Tseng added.

Taiwan Semiconductor Manufacturing Co. was up US$1.70 at US$58.40 dollars and United Microelectronics Corp was up 0.40 at US$19.40.

Tokyo

Japanese share prices jumped over two percent, topping 15,500 points for the first time in almost four weeks on hopes that US interest rates are close to peaking, dealers said.

They said the market had taken a widely expected quarter-point interest rate rise by the US Federal Reserve overnight in its stride and cheered signs that the US central bank may be softening its monetary policy stance.

The Tokyo Stock Exchange's benchmark Nikkei-225 index rose 384.03 points or 2.54 percent to 15,505.18 by the close, reaching the highest level since June 5 on Wall Street's positive lead. Over the week the index was up 2.52 percent.